7 New Bitcoin Token Standards You Should Know About
May 20, 2024
The rise of on-chain assets on the Bitcoin base layer opens up the network to new use cases. Bitcoin token standards have caused quite a stir among Bitcoin users who support experimentation with other use cases for Bitcoin.
Read on to learn about seven new token standards on Bitcoin and what they bring to the ecosystem.
What Are Bitcoin Token Standards?
Bitcoin token standards are a set of rules for administering the design and operation of a token on the Bitcoin network. These token standards guide the minting and issuance of fungible tokens on Bitcoin.
For the longest time, token standards were only available on smart contract-driven chains like Ethereum. As such, builders within the Ethereum ecosystem spawned the ERC series, comprising ERC-20, ERC-721, and ERC-7115, among others.
Token standards on Bitcoin are a relatively new thing.
Bitcoin is known primarily as digital money and a store of value. However, while Bitcoin seeks to democratize money as we know it, its blockchain is incompatible with complex smart contracts.
In recent years, two major software updates were implemented to the Bitcoin protocol: the Segwit and Taproot upgrades. These upgrades resulted in improved on-chain storage and enhanced Bitcoin transaction efficiency. More importantly, the updates were instrumental in the development of the Ordinal Theory and the eventual rise of Bitcoin token standards.
Ordinal Theory proposed a numbering scheme for individually inscribed sats on the Bitcoin network. The sats are engraved with digital files, text, images, and videos, transforming them to Bitcoin native NFTs known as Ordinals.
The Ordinals protocol also bestowed some degree of Web3 functionality to Bitcoin. Consequently, developers began to create frameworks for Bitcoin fungible tokens.
New Token Standards on Bitcoin
Let’s take a look at the most prominent token standards on Bitcoin.
BRC-20
BRC-20 tokens were the first Bitcoin fungible tokens to emerge under the Ordinal Theory. In March 2023, a pseudonymous programmer named Domo proposed the BRC-20 standard.
According to Domo, the purpose of BRC-20 is to be an experimental and fun token standard. This standard allows anyone to mint Bitcoin-native fungible tokens and brings more users to Bitcoin.
Runes
Runes are Bitcoin-native fungible tokens based on the Runes protocol. Runes was proposed by Ordinals creator Casey Rodarmor in September 2023 and launched in April 2024 as a simpler alternative to the experimental BRC-20 standard.
The protocol aims to be more efficient than the BRC-20 token standard by offering correct UTXO management and reducing on-chain presence. It relies on Bitcoin’s UTXO model to lower the production of unnecessary UTXOs and enhance overall efficiency.
ARC-20
The Atomicals protocol brings colored coins to Bitcoin by backing every token with one satoshi, to represent ownership of deployed token units. The token standard was introduced in 2023 and intends to solve the problem of representing arbitrary fungible tokens on Bitcoin.
ARC-20 tokens are interchangeable and designed to complement other protocols. Moreover, colored coins are Bitcoin with a distinct mark for describing their specific use, and may be used to represent real-world assets and commodities on Bitcoin. These coins happen to be one of the foundations of establishing ownership of assets on the Bitcoin network.
CBRC-20
CBRC-20 is a meta protocol for developing fungible tokens based on Ordinals Theory. The token standard was developed by a group known as THEMOTO in December 2023.
CBRC tokens aim to improve on BRC-20 by lowering inscription costs and optimizing the indexing of fungible tokens on Bitcoin. These tokens are minted by storing CBOR files in Ordinal envelopes.
BRC-100
The BRC-100 protocol is responsible for deploying tokens with computing abilities and states. BRC-100 creator Mikael proposes the BRC-100 token standard as a protocol that supports decentralized computing and is based on the Ordinals theory.
BRC-100 aims to improve on BRC-20 by extending computing capabilities to Bitcoin-native fungible tokens. The protocol leverages the UTXO model and state machine to add a computing layer to Bitcoin through an emerging concept known as modularity; the process of breaking down the singular architecture of traditional blockchains into separate distinct layers.
BRC-420
BRC-420 token standard allows for creating complex types of fungible assets through recursion in the metaverse. Launched in 2023 the protocol is a universal standard for powering a future metaverse economy.
The protocol’s underlying infrastructure is based on Bitmap, an Ordinal-based metaverse protocol on the Bitcoin blockchain. In addition to supporting complex asset formats, it enables participants in the metaverse to earn inscription royalties through usage rights.
ORC-20
ORC-20 is an open token standard on Bitcoin whose purpose was to surpass some of the limitations of BRC-20. The token standard is the brainchild of OrcDAO in July 2023.
According to its creators, ORC-20 is an experimental standard that supports a wide range of data formats. ORC-20 leverages the UTXO transaction model to reduce the probability of double-spending.
The Impact of On-Chain Tokens on Bitcoin
Bitcoin token standards have provided several benefits to the Bitcoin ecosystem.
The main advantage is that they bring more liquidity to the Bitcoin ecosystem as users mint and trade these tokens. Moreover, on-chain tokens can offer new capabilities previously unavailable on the Bitcoin blockchain. For instance, ARC-20 tokens can tokenize real-world assets on the Bitcoin network.
With that said, Bitcoin token standards also have their drawbacks. For instance, many on-chain tokens are experimental and have limited utility. Furthermore, some of these protocols are sophisticated, an attribute that tends to curtail their adoption across the wider Bitcoin community.
Final Word
While Bitcoin fungible tokens are still in the early stages, the focus is now moving to implementing concrete use cases.
Bitcoin token standards can play an important role in attracting developers from other protocols to innovate on Bitcoin. This helps to extend Bitcoin’s structural properties and utility to other networks.